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The spontaneous order of the market has long been an object of both theoretical and aesthetic contemplation for libertarians. From Adam Smith’s discussion of the number of hands it took to make a wool coat, to Leonard Read’s justly famous “I, Pencil,” to the examples that fill Russ Roberts’s parable novel The Price of Everything, libertarians have tried to communicate through stories the idea that order can arise without a designer.

The repeated attempts to communicate this core idea suggest that the challenge of doing so is greater than it seems, and I would argue that one reason for this is that we are cognitively predisposed to resist the idea of undesigned order. The human brain came of age through a long evolutionary process, the vast majority of which was spent in small kin-based groups of no more than 100 or so. In such groups the relationships among people are face-to-face or intimate — everyone knows everyone else, and each person’s role is clearly defined and known to others. The ties that hold people together and form the degree of social cooperation that exists are visible to all. Such groups also had clear hierarchies to them, with only a subgroup, often elders, making decisions about resource allocation.

As a result, our brains are used to thinking that social relationships need to be visible and among people we already know. We are also predisposed to think that resource allocation and social order more generally are the products of clear direction from the top and well-defined roles in a face-to-face world. Of course these cognitive predispositions, much like genetic predispositions, are not an unchangeable destiny. Still, that evolution has given us brains used to seeing the social world in this way makes for an uphill climb when we try to persuade people of the existence and beneficence of undesigned order.

More specifically, the fundamental characteristic of modern times is that we have learned to produce social cooperation in a world of anonymity. This is what stories like the wool coat and “I, Pencil” try to get us to appreciate. That the order is undesigned is one element of the story, but we should not forget that they are also stories of how people who do not know each other, who have never met, and who are not even aware that they are contributing to the same end can nonetheless cooperate to produce coats or pencils or pretty much anything and everything else.

Adam Smith recognized this in the famous passage in The Wealth of Nations where he talks about the butcher, baker, and brewer providing us with our meal not from their benevolence but their self-love: “We address ourselves, not to their humanity but to their self–love, and never talk to them of our own necessities but of their advantages.” What’s often forgotten is what precedes this passage. Smith points out that the reason we need to rely on self-love rather than benevolence is that life is too short for us to get to know more than a few people well, and they are not numerous enough to provide us with the necessities of (then) modern life.

Those who know us intimately don’t need to be coaxed into helping us by appealing to their self-love — they have our well-being in mind because they know us and care about us. The problem is how to entice the stranger, and this is when Smith invokes the passage quoted above. The division of labor and exchange that is at the core of the market not only improves the economic position of all concerned, it also generates bonds of social interdependence. This is why Ludwig von Mises referred to the generalized version of David Ricardo’s law of comparative advantage as the “Law of Association” and made it the central explanation of social cooperation in anonymity.

The market generates this cooperation through its institutions, such as private-property rights, contracts, and, especially, the knowledge and incentives generated by the price system. They enable us to figure out how to orient our behavior toward others in ways that lead us to produce what they want and to use our own resources wisely. The result is a cooperation among strangers that is not the product of any intentional design.

For humans, whose brains developed in social worlds of intimacy, the ideas that cooperation with strangers is both possible and desirable and that it can arise without top-down conscious design run against our cognitive and moral instincts.

Thankfully, evolution has given us one other predisposition. We are very receptive to stories; we are, in the words of literary scholar Jonathan Gottschall, “storytelling animals.” For those of us who understand the benefits of undesigned order and cooperation in anonymity, it will continue to take great creativity and skill to develop really good stories that tap into that part of our brains and help others get past the predispositions generated in other parts. It will be hard work to convey in story form how prices, profits, and property make cooperation possible and beneficial. But I have confidence that creative, storytelling libertarians will keep getting better at it.

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Steven Horwitz is Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY and an Affiliated Senior Scholar at the Mercatus Center in Arlington, VA. He is the author of two books, Microfoundations and Macroeconomics: An Austrian Perspective (Routledge, 2000) and Monetary Evolution, Free Banking, and Economic Order (Westview, 1992), and he has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and the economics and social theory of gender and the family. His work has been published in professional journals such as History of Political Economy, Southern Economic Journal, and The Cambridge Journal of Economics. He has also done public policy research for the Mercatus Center, Heartland Institute, Citizens for a Sound Economy, and the Cato Institute. Horwitz is also a Senior Fellow at the Fraser Institute in Canada and a contributing editor of The Freeman. He has a PhD in Economics from George Mason University and an AB in Economics and Philosophy from The University of Michigan. He is currently working on a book on classical liberalism and the family.

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.